Relating to increasing access to and reducing taxation of Internet services, the official text

S.B. No. 1405

AN ACT

relating to increasing access to and reducing taxation of Internet

services.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Sections 403.553(a)(3) and (4), Government Code,

are amended to read as follows:

(3) "Qualifying broadband service" means broadband

service as defined by Section 490I.0101 [retail wireline or

wireless broadband service capable of providing:

[(A) a download speed of 25 megabits per second or

faster; and

[(B) an upload speed of 3 megabits per second or

faster].

(4) "Unserved area" means a location that lacks access

to [a] retail fixed, terrestrial, wireline, or wireless qualifying

broadband service [Internet service capable of providing:

[(A) a download speed of 25 megabits per second or

faster; and

[(B) an upload speed of 3 megabits per second or

faster].

SECTION 2. Section 403.553(o), Government Code, is amended

to read as follows:

(o) Not later than November 1 of each year [the 60th day

after the date the pole replacement fund receives money for the pole

replacement program], the comptroller shall [maintain and] publish

on the comptroller's Internet website:

(1) statistics on the number of applications received,

processed, and rejected by the program in the preceding state

fiscal year;

(2) statistics on the size, number, and status of

reimbursements awarded by the program in the preceding state fiscal

year, including the retail broadband service providers and pole

owners receiving reimbursements; and

(3) the estimated amount of money available for grants

from the program as of the last day of the preceding state fiscal

year [remaining in the pole replacement fund].

SECTION 3. Section 490I.0101(a), Government Code, is

amended to read as follows:

(a) For purposes of this chapter, subject to Subsection (b),

"broadband service" means Internet service with the capability of

providing a:

(1) speed of not less than 100 [25] megabits per second

for a download;

(2) speed of not less than 20 [three] megabits per

second for an upload; and

(3) network round-trip latency of less than or equal

to 100 milliseconds based on the 95th percentile of speed

measurements.

SECTION 4. Sections 490I.0105(a), (c), (f), and (q),

Government Code, are amended to read as follows:

(a) The broadband development office shall create, update

annually, and publish on the comptroller's Internet website a map

classifying each broadband serviceable location in this state as:

(1) an unserved location if the location:

(A) does not have access to reliable broadband

service capable of providing:

(i) [the] speeds matching standards adopted

by the Federal Communications Commission if required by the

comptroller under Section 490I.0101(b); or

(ii) if the comptroller has not exercised

the comptroller's authority under Section 490I.0101(b), speeds

described by Section 490I.0101(a); or

(B) is a public school or community anchor

institution and does not have access to reliable gigabit-level

broadband service;

(2) an underserved location if the location is not an

unserved location but does not have access to reliable broadband

service with the capability of providing:

(A) a speed of not less than 100 megabits per

second for a download;

(B) a speed of not less than 20 megabits per

second for an upload; and

(C) a network round-trip latency of less than or

equal to 100 milliseconds based on the 95th percentile of speed

measurements; or

(3) a served location if the location is neither an

unserved nor an underserved location.

(c) The [After creation of the initial map described in

Subsection (a), the] office may evaluate the usefulness of the

standards for unserved and underserved locations outlined in

Subsection (a) and, if appropriate, make a recommendation to the

legislature to revise the standards.

(f) The [Except as provided by Subsection (g), the] office

shall use the best available data, including information available

from the Federal Communications Commission, to create or update the

map.

(q) The office is not required to create, update, or publish

a map under this section if the office adopts a map produced by the

Federal Communications Commission [produces a map] that[:

[(1)] enables the office to identify unserved,

underserved, and served locations [eligible and ineligible areas,]

as described by Subsection (a)[; and

[(2) meets the requirements of Subsection (d)].

SECTION 5. Section 490I.0106, Government Code, is amended

by amending Subsections (a), (a-1), (a-2), (a-3), (b), (d), (f),

and (h) and adding Subsections (h-1) and (j) to read as follows:

(a) The broadband development office shall establish a

program to award contracts, grants, low-interest loans, and other

financial incentives [to applicants] for the purpose of expanding

access to and adoption of broadband service.

(a-1) The office may award contracts, grants, low-interest

loans, and other financial incentives [to applicants] for eligible

broadband infrastructure projects designed to provide qualifying

broadband service to unserved and underserved locations. For the

purposes of this subsection, an eligible broadband infrastructure

project includes a project in which not less than 80 percent of the

broadband serviceable locations to be served by the project are

unserved and underserved locations.

(a-2) The office may award contracts, grants, low-interest

loans, and other financial incentives [to applicants] for

middle-mile broadband infrastructure projects.

(a-3) The office may award contracts, grants, low-interest

loans, and other financial incentives [to applicants] for projects

not involving the deployment of broadband infrastructure that

expand the accessibility, affordability, or adoption of broadband

service, including education, training, community outreach, remote

learning or telehealth facilities, equipment purchases, or any

other use permitted by the applicable funding source.

(b) In making an award under this section, the office shall,

to the extent applicable [The office shall establish eligibility

and award criteria for making awards under this chapter for each

applicable notice of funds availability. The comptroller by rule

may prescribe the manner in which the office shall provide notice to

applicants of the applicable criteria. In establishing

eligibility and award criteria, the office shall]:

(1) take into consideration grants and other financial

incentives awarded by the federal government for the deployment of

broadband service;

(2) prioritize [the] applications [of applicants]

that will expand access to and adoption of broadband service in

designated areas in which the highest percentage of broadband

serviceable locations are unserved or underserved locations;

(3) prioritize [the] applications [of applicants]

that will expand access to broadband service in public and private

primary and secondary schools and institutions of higher education;

(4) give preference to an applicant that provided the

information requested by the office under Section [490I.0105 or]

490I.01061; and

(5) take into consideration whether an applicant has

forfeited federal funding for defaulting on a project to deploy

qualifying broadband service.

(d) The office may not:

(1) except as provided by Section 490I.01062, favor a

particular broadband technology in awarding contracts, grants,

loans, or other financial incentives;

(2) award a contract, grant, loan, or other financial

incentive for the deployment of last-mile broadband service to a

noncommercial provider of broadband service for a broadband

serviceable location if an eligible commercial provider of

broadband service has submitted an application for the same

location;

(3) take into consideration distributions from the

state universal service fund established under Section 56.021,

Utilities Code, when deciding to award contracts, grants, loans, or

other financial incentives; or

(4) except as provided by Section 490I.01061, award a

contract, grant, loan, or other financial incentive for deployment

of last-mile broadband service for a location that is subject to an

existing [a] federal commitment to deploy qualifying broadband

service on the date the application is submitted or during the

application process.

(f) During the 30-day posting period described by

Subsection (e) for an application, the office shall accept from any

interested party, other than a broadband service provider that does

not report information requested by the office under Section

[490I.0105 or] 490I.01061, a written protest of an [the]

application submitted for a contract, grant, loan, or other

financial incentive under Subsection (a-1) relating to whether the

broadband serviceable locations contained in the application are

eligible to receive funding [applicant or project is eligible for

an award or should not receive an award based on the criteria

prescribed by the office].

(h) The office shall establish and publish criteria for

award recipients. The criteria must include requirements that:

(1) contracts, grants, loans, and other financial

incentives awarded through the program for the deployment of

broadband infrastructure may be used only for capital expenses,

purchase or lease of property, and other expenses, including

backhaul and transport, that will facilitate the provision or

adoption of broadband service; and

(2) an award recipient must make a reasonable effort

to restore private property affected by a broadband infrastructure

project funded under Subsection (a-1) to the condition the property

was in before the beginning of the project.

(h-1) The office may revoke or reduce an award made under

this section if the office determines the award recipient made a

material misrepresentation related to compliance with a

requirement established under Subsection (h).

(j) The office shall publish on the comptroller's Internet

website information regarding each grant awarded under Subsection

(a-1), including the grant recipient's name, the area targeted for

expanded broadband service access, the amount of the grant award,

the status of the grant award, including incremental completion

status, and any other information the office considers relevant.

SECTION 6. Section 490I.0110(i), Government Code, is

amended to read as follows:

(i) A person who is professionally affiliated with a person

serving as a member of the board of advisors is not eligible for

funding from the broadband development program under Section

490I.0106 if the member is involved in decisions regarding the

award of contracts, grants, loans, or other financial incentives

under that section.

SECTION 7. Sections 151.00394(b) and (c), Tax Code, are

amended to read as follows:

(b) "Internet access service" does not include [and the

exemption under Section 151.325 does not apply to] any [other]

taxable service listed in Section 151.0101(a), unless the taxable

service is provided in conjunction with and is merely incidental to

the provision of Internet access service.

(c) [On and after October 1, 1999,] "Internet access

service" is not included in the definitions of "data processing

service" and "information service."

SECTION 8. Section 151.0101(a), Tax Code, is amended to

read as follows:

(a) "Taxable services" means:

(1) amusement services;

(2) cable television services;

(3) personal services;

(4) motor vehicle parking and storage services;

(5) the repair, remodeling, maintenance, and

restoration of tangible personal property, except:

(A) aircraft;

(B) a ship, boat, or other vessel, other than:

(i) a taxable boat or motor as defined by

Section 160.001;

(ii) a sports fishing boat; or

(iii) any other vessel used for pleasure;

(C) the repair, maintenance, and restoration of a

motor vehicle; and

(D) the repair, maintenance, creation, and

restoration of a computer program, including its development and

modification, not sold by the person performing the repair,

maintenance, creation, or restoration service;

(6) telecommunications services;

(7) credit reporting services;

(8) debt collection services;

(9) insurance services;

(10) information services;

(11) real property services;

(12) data processing services;

(13) real property repair and remodeling;

(14) security services;

(15) telephone answering services; and

(16) [Internet access service; and

[(17)] a sale by a transmission and distribution

utility, as defined in Section 31.002, Utilities Code, of

transmission or delivery of service directly to an electricity

end-use customer whose consumption of electricity is subject to

taxation under this chapter.

SECTION 9. Section 171.10132, Tax Code, is amended by

amending Subsection (a) and adding Subsection (a-1) to read as

follows:

(a) In this section, "qualifying broadband grant" means a

grant for broadband deployment in this state received by a taxable

entity:

(1) under the Broadband Equity, Access, and Deployment

Program established under 47 U.S.C. Section 1702;

(2) under the State Digital Equity Capacity Grant

Program established under 47 U.S.C. Section 1723;

(3) under the Digital Equity Competitive Grant Program

established under 47 U.S.C. Section 1724;

(4) under the provisions of 47 U.S.C. Section 1741

providing for middle mile grants;

(5) under the broadband loan and grant pilot program

authorized under Section 779, Title VII, Div. A, Consolidated

Appropriations Act, 2018 (Pub. L. No. 115-141, 132 Stat. 399), from

funds made available for that program under the heading "Distance

Learning, Telemedicine, and Broadband Program," "Rural Utilities

Service," "Rural Development Programs" in Title I, Infrastructure

Investments and Jobs Appropriations Act (Title I, Div. J, Pub. L.

No. 117-58, 135 Stat. 1351);

(6) under Section 905, Division N, Consolidated

Appropriations Act, 2021 (Pub. L. No. 116-260, 134 Stat. 2136);

[or]

(7) from a state, territory, tribal government, or

unit of local government to the extent the grant was:

(A) funded by amounts provided under 42 U.S.C.

Section 802, 803, or 804; and

(B) provided for the stated purposes of making

investments in broadband infrastructure; or

(8) from the comptroller under Subchapter S, Chapter

403, Government Code, or Chapter 490I of that code.

(a-1) For purposes of Subsection (a)(8), a reimbursement

award received by a taxable entity under Subchapter S, Chapter 403,

Government Code, is considered a grant for broadband development in

this state.

SECTION 10. The following provisions are repealed:

(1) Chapter 490H, Government Code;

(2) Sections 490I.0105(g), (h), (i), (j), (k), (l),

(n), (o), and (p), Government Code; and

(3) Section 151.325, Tax Code.

SECTION 11. The changes in law made by this Act do not

affect tax liability accruing before the effective date of this

Act. That liability continues in effect as if this Act had not been

enacted, and the former law is continued in effect for the

collection of taxes due and for civil and criminal enforcement of

the liability for those taxes.

SECTION 12. Section 171.10132, Tax Code, as amended by this

Act, applies only to a report originally due on or after January 1,

2026.

SECTION 13. This Act takes effect July 1, 2025, if it

receives a vote of two-thirds of all the members elected to each

house, as provided by Section 39, Article III, Texas Constitution.

If this Act does not receive the vote necessary for effect on that

date, this Act takes effect September 1, 2025.

______________________________
______________________________

President of the Senate
Speaker of the House

I hereby certify that S.B. No. 1405 passed the Senate on

April 15, 2025, by the following vote: Yeas 27, Nays 4;

May 25, 2025, Senate refused to concur in House amendments and

requested appointment of Conference Committee; May 27, 2025, House

granted request of the Senate; May 31, 2025, Senate adopted

Conference Committee Report by the following vote: Yeas 27,

Nays 4.

______________________________

Secretary of the Senate

I hereby certify that S.B. No. 1405 passed the House, with

amendments, on May 22, 2025, by the following vote: Yeas 111,

Nays 31, two present not voting; May 27, 2025, House granted

request of the Senate for appointment of Conference Committee;

June 1, 2025, House adopted Conference Committee Report by the

following vote: Yeas 102, Nays 36, one present not voting.

______________________________

Chief Clerk of the House

Approved:

______________________________

Date

______________________________

Governor